Fine Organics Industries Ltd- Q4FY19 Result Analysis
Given the consistent nature of the Fine Organics’ niche business and the strong moat around it, the prices are consistently climbing and are at a very high valuation level. But still, the high valuation is still a deterrent for taking a position in the company.
Let’s look at the expansion plan status of the company:
Through Fine Zeelandia Pvt Ltd which is a 50:50 joint venture with Zeelandia group(Netherlands), the company is trying to get into a new segment with the introduction of premixes for pastry, bread etc. The facility has started commercial production since April end. The plant has a capacity of 10,000 TPA and is located at Patalganga, Maharashtra. It can more or less be considered as a trial run, where the company is trying to test the market and improvise upon it.
The 32,000 TPA 3rd Ambernath facility which has incurred capex of ₹150cr is expected to be complete the expansion by June 2019 end. Usually post-expansion, the new facility will start manufacturing manually for a couple of months and then gradually move to fully automatic production. Management expects the facility to run at around 30% utilization for the remaining 9 months of the year(FY20).
The existing plants with a capacity of 69,300 TPA is running at full capacity. In terms of revenue growth with the new capacities coming up, it is likely to start getting visible only post Q2 FY20 i.e. Q3Fy20.
You can read more about the company using the below link:
Himatsingka Seide Ltd - Q4FY19 Result Analysis
Himatsingka Seide Ltd had taken a massive expansion project with heavy debt(₹1300cr) to fund the backward integration. The idea was to increase the margins. But that is not going in the direction the company wanted it to go. As of now, it has lead to an increase in other expenses, interest charges, depreciation expense, which negates whatever advantage the company has got via backward integration.
The market that Himatsingka Seide is catering to is North America, which has become stagnant. So whatever sales growth is coming is from the market share capture of other textile brands. Because of this, the company is trying to establish their new brand ‘Himaya’ in the bath category in the Indian market as well as fine-tuning its European expansion. Other similar efforts in the past has not leaded any significant result in India.
Last quarter(Q3FY19) was good with a favorable market condition but this quarter the company faced a lot of headwinds and the Profit before tax dropped from 14% in Q4FY18 to 9.7% in Q4 FY19.
Terry towel trial production began on Feb 20th, 2019.Will start commercial production in Sept 2019.(The facility commenced commercial production since Oct 03, 2019). This would be the last leg of expansion and post that the debt might start coming down gradually.
Q4FY19 was marked by lower realization. and higher capacity utilization in the sheeting unit.
It is better to track the company for sometime before taking any position.
You can read more about the company using the below link:
National Peroxide Ltd- Q4FY19 Result Analysis
Hydrogen Peroxide prices
The market pays for what they are expecting in the future. With additional capacities of Hydrogen peroxide coming up(the only product being manufactured by National Peroxide Ltd), the prices are expected to face downward pressure. As seen from the data below, the prices have started to fall from a level enjoyed by the company at ₹165/kg last year.
Although the demand remains firm as observed from the stellar result by paper companies, the supply has increased.
You can read more about the company using the below link:
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